Dilema at Day-Pro Essay Example for Free

Dilema at Day-Pro EssayThe crossover point is the station at which the NPV of the two projects are equal. NPV has a direct relationship between NPV and Economic Value Added. The NPV shows how the shareowners wealthiness would be increased if the project is accepted. The goal of the company is to increase shareholders wealth, thus NPV shows the better way in choosing the right decision to achieve their goal. NPV method implicitly assumes that the rate at which cash flows can be reinvested is the cost of crownwork, whereas the IRR method assumes that the firm can reinvest at the IRR. NPV method is better because it selects the project that adds the most to shareholder wealth.Tim can show that the MIRR is the much realistic measure to use in the case of mutually scoop shovel contracts by apologizeing that by using MIRR, they can avoid the multiple IRR problems and at the same time explain that since re investment at the cost of capital is generally more correct, the MIRRwhic h assumes that CFs from all projects are reinvested at the cost of capital rather than on the projects own IRR (in the case of IRR), is a better indicator of a projects true profitability. Tim could also state that with the use of MIRR, the company can avoid nigh conflicts encountered when comparing NPV with IRR. With the use of MIRR, they can minimize the conflict between the two, just like when the two projects cosmos compared have equal size and same life, both NPV and MIRR leads to the same decision. The company can also scram at the same decision when the two projects being compared have equal size and different life. victimisation Profitability Index can help in deciding which project to choose because it gives the ratio which allows us to measure the proportion of money returned to money invested. Thus by profitability index, it allows us to compare investment opportunities that prays us different initial investments. The high profitability index forget be chosen becaus e it gives higher possible return in the amount that is to be invested. In short, in the dilemma of Day-pro, Synthetic rosin must be chosen because it gives a higher return in spite of the high initial investment. However, in using this method, the analyst will ignore many factors, such as risk, cost of capital, and fluidity of the project. Thus, the company must consider or decide first on what factor they will footstall their decision in choosing a project.Being more conservative in revenue projection will give us an idea that the project is less liquid because they projected a longer finish of time before the company can earn back the invested amount. Moreover, it also indicates that they considered the possible risks that may bump in the project along the way. The chance of overestimation and underestimation of the project is less possible that put to work it more realistic. Thus, the Synthetic Resin project is more reliable and accurate. Knowing that the synthetic resin wo uld require extensive and longer time before it could be implemented, it will cause doubt on the man of the Board to choose thisproject because it only says that Synthetic Resin project is less liquid compared to epoxy resin and the company will be tied longer to this project before it can heal the invested capital.However, looking at the other side of the coin, synthetic resin gives a higher return in spite of its flaws and its risks. On the other hand, Epoxy Resin seems to be more liquid and less tempestuous and the return of this project is less compared to the Synthetic Resin. As a result, the board might be more attracted to Epoxy Resin. Still, the decision of the board depends on what they give importance or emphasis in choosing a project. And since the Board has a strong preference in using rates or return as its criteria, we would recommend to the Board to choose Synthetic Resin.